Exploring auto loan refinancing options is a smart financial strategy to lower your payment or change the term on your auto loan.  Refinancing can also provide the opportunity to add valuable products that increase your control over the cost of vehicle ownership or let you adapt to changes in your life, such as adding or removing a borrower from your car loan.  Since refinancing your auto loan means getting a completely new auto loan that pays off the old loan, it provides the opportunity for meaningful changes that help you manage your budget and financial plans.

How to Pre-qualify for an Auto Refinance

Of course, not everyone qualifies to refinance their loan.  A credit score is one key element, but it isn’t the only factor that dictates whether you qualify or the terms of the new loan for which you may qualify.  Lenders use many factors related to your personal financial strength and history as well as vehicle criteria to determine your eligibility and loan terms.  Each lender evaluates those criteria differently and has unique methods to assign an interest rate to a loan application, based on their definition of the associated risk.

Since applying for a new auto loan involves one or more lenders pulling a credit report, which may affect your credit score, it’s a good idea to review your qualifications first to determine if you are likely to qualify.  In other words, going through a pre-qualification evaluation can be helpful, both in terms of your credit score and your time and effort.  RefiJet uses the following factors to conduct a pre-qualification process that involves comparing your criteria against the criteria of various lenders in our program, then submitting your application to the one lender that is the best fit for you.  If you pre-qualify through RefiJet, the chances are very high that you will qualify with one of our lenders.

Vehicle Criteria:  Lenders evaluate multiple criteria regarding the value of the vehicle being refinanced.  They use a third-party valuation guide to establish your vehicle’s market value, then compare it to the amount of the loan you need.  This Loan-to-Value ratio is a key risk factor when deciding whether or not to approve a loan and setting loan terms, such as interest rate.  In addition, lenders typically set guidelines about the type of vehicles they will or won’t allow.

• Make/Model: Most lenders accept major makes and models.  The options narrow if you have a very high-end vehicle or a make/model that has experienced major issues over time or has been discontinued.
• Age: Most lending programs won’t cover a vehicle over 10 years old based on the model year. (model year may be different than calendar years)
• Mileage: If you have a vehicle with high mileage, it can affect both your ability to get a refinance loan and the loan terms.  Some lenders have mileage maximums, such as 100,000 miles.  Others may allow a high-mileage vehicle, but increase the interest rate or limit the loan term to reduce their risk.
• Usage: If your vehicle is used for commercial purposes (in some cases, including use for ride-sharing), the vehicle typically won’t qualify for a traditional, personal auto loan refinance.
• Title: Lenders require you to guarantee that the title is clean.  If the title isn’t clear or if the vehicle is a salvage, lemon, or flooded vehicle, for example, most lenders will not approve a loan refinance.

Financial Criteria:  Your past credit history as well as your current financial stability factor in your ability to qualify for a loan and the terms for which you qualify.  The following factors are considered when evaluating whether you will qualify for a loan.  In some cases, an individual factor can disqualify you if you don’t pass the minimum threshold, even if the other factors qualify.

• Credit score: Most lenders set a minimum threshold for credit score.  Above that threshold, many use credit score as one of the factors upon which they adjust the terms (such as interest rate, maximum loan term, maximum loan amount, etc.).
• Credit History: Lenders may consider both your overall credit history, based on the amount of time you have had credit and the number of credit lines on your report, and the number of paid-on-time payments you have specifically on auto loans.
• Payment history: Although your history of making payments on time is factored into your credit score, lenders also consider payment history separately.  If your credit bureau report shows late auto loan payments, an auto repossession or charge-off, or a pattern of late payments on other loans, it will be harder to qualify or get favorable loan terms.
• Overall debt: Lenders evaluate debt compared to income and/or your overall credit limit.  In some cases, different types of debt, such as student loans, medical debt, and home-equity lines of credit, are treated differently.  In general, if the ratio of Debt to Income, based on the amount of your monthly debt divided by your monthly gross income, is less than  50% you are more likely to qualify.
• Outstanding loan balance
• Income: Income factors into a lender’s evaluation in three ways:  the minimum monthly income threshold, the debt to income ratio, and the payment to income ratio.  The higher your income, the better your ratios and the more comfortable a lender becomes with extending credit, which results in better terms.  Just remember, lenders may ask for proof of income and or employment to confirm your income, depending on your employment and income history and credit score.

Get started on Pre-qualifying for an Auto Refinance

If it looks like you may pre-qualify for an auto loan refinance, contact RefiJet to submit your application information.  At no cost to you, RefiJet will evaluate that information against various lenders’ lending programs to determine if you pre-qualify and the likely loan terms from appropriate lenders.  Then, you can select the option that works best for you and approve your application being submitted to a lender for formal approval.  It’s a fast, simple, and safe way to evaluate your pre-qualified options without having to submit multiple applications to multiple lenders.